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DailyExpertNews Business
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Long-awaited September jobs data caused markets to cool on Friday. Shares fell sharply as investors reviewed the report, which found more jobs than expected were being added to the US economy and indicated more pain-causing Federal Reserve rate hikes ahead.
But a breakdown of the numbers shows that the Fed’s plans to weaken the labor market to combat ongoing inflation may already be working, just not for everyone.
Office workers appear to be bearing the brunt of the Fed’s actions as the financial and corporate sectors saw a sharp decline in employment last month. Legal and advertising services also experienced declines. Meanwhile, the service and construction workers are still thriving.
What is going on: The US economy added 263,000 jobs in September, more than analysts’ estimates of 250,000. The unemployment rate stood at 3.5%, compared to 3.7% in August.
The biggest job growth was the leisure and hospitality sector, which added 83,000 jobs in September – and employment in hospitality and beverage outlets alone accounted for 60,000 of those jobs. Manufacturing and construction were also popular, with 22,000 and 19,000 jobs respectively.
The largest non-governmental job losses came from the financial sector, which lost 8,000 jobs between August and September. Major banks rent in cycles, expanding offers to fresh graduates in the early fall months. That makes the drop in September particularly significant.
Business support services — such as telemarketing, accounting, and clerical and administrative jobs — are also jobs with blood. The sector lost 12,000 in September. In the meantimeIegal services lost 5,000 jobs, and advertising services also lost 5,000 jobs.
What it means: The Federal Reserve’s aggressive policies appear to be cooling some parts of the economy, but not others. Finance workers are probably starting to worry as their industry relies on stock and credit markets that have been hit particularly hard by Fed actions.
Friday’s numbers indicate that we are starting to see that impact in the employment data.
What remains to be seen is whether the Fed can cool the economy by cutting employment in white-collar industries, or if these losses will trickle down to other industries, hurting lower-income workers.
Shortly: Earnings season kicks off in earnest this week with reporting from major banks such as JPMorgan, Citigroup (C), Morgan Stanley (MS) and BlackRock (BLK). Investors will be watching closely for guidance on hiring and firing plans.
Two key inflation indicators, PPI and CPI, will also be released. Expect markets to react badly as inflation heats up.
A panel of top US economists has just released its economic outlook for the coming year, and it’s not great.
The panel of 45 forecasters, led by the National Association for Business Economics (NABE), said they expected slower growth, higher inflation, higher interest rates and weakening employment in both 2022 and 2023 than they previously expected.
Most of the concerns stem from the Federal Reserve’s interest rate policy.
“More than three-quarters of respondents believe there is a 50-50 chance or less that the economy will make a ‘soft landing’,” said NABE Vice President Julia Coronado. “More than half of the panelists say the biggest downside risk to the US economic outlook is too much monetary tightness.”
NABE panelists lowered their median real GDP forecast for the fourth quarter of 2022 to an increase of 0.1%, compared to a 1.8% increase in the May 2022 survey. The vast majority of respondents estimated a greater than 25% chance of a recession in 2023, with the most likely start date in the first quarter.
The latest report comes as a growing number of economists predict a recession is imminent. Former US Treasury Secretary Larry Summers told DailyExpertNews on Thursday that it is “more likely than not” that the US will enter a recession, calling it a result of the “excesses the economy has gone through”.
Friday’s jobs report found that the proportion of employees who telecommute or work from home is lower because of the pandemic – falling to just 5.2% in September, from 6.5% in August.
Distance working in the United States, which many predicted would remain the norm long after the pandemic, appears to be on the decline, especially as the job market for white-collar workers is loosening and workers have less influence.
Last week, a KPMG survey of US-based CEOs found that two-thirds believed office work would be the norm within the next three years.
Still, it may not be enough to help an ailing commercial real estate market where the outlook is bleak. According to a recent study by the National Bureau of Economic Research, office properties in New York City have declined in value by nearly 45% in 2020 and are expected to remain 39% below their pre-pandemic levels over the long term as hybrid policies continue.
Look forward to something: The Bureau of Labor Statistics has noted that while hybrid work may still be popular, Covid-19 is no longer driving work-from-home trends. The October report will reformulate its telecommuting questions to remove references to the pandemic.
Since May 2020, every job report asks, “Have you made phone calls or worked from home for pay at any time in the past four weeks? because of the corona pandemic?”
In May 2020, 35.4% answered yes.
The question will be revised from next month. “Have you telecommuted or paid at home at any point in the past week?” it will ask, narrow the timeline and eliminate any reference to the pandemic.
The US bond market is closed for Columbus Day/Indigenous Peoples’ Day.
Coming later this week:
▸ Third quarter earnings season begins. Expect reports from major banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), Morgan Stanley (MS), PNC (PNC) and US Bancorp (USB) and consumer goods such as Pepsi (PEP), Walgreen (WBA) ) and Dominoes (DMPZF).
▸ CPI and PPI, two closely watched inflation measures in the US, will also be released.